MFA SEEKS WAY TO HELP LUTHERAN HOSPITAL TO STAY

C O N F I D E N T I A L TEL AVIV 005703 SIPDIS E.O. 12958: DECL: 09/15/2015 TAGS: PGOV PHUM KIRC ECON IS GOI INTERNAL SUBJECT: MFA SEEKS WAY TO HELP LUTHERAN HOSPITAL TO STAY SOLVENT Classified By: Political Counselor Norman Olsen for reasons 1.4 (b,d). ¶1. (C) MFA Director of the Division for Religious Affairs Zvi Tal (protect) told Embassy Poloffs and visiting NEA/IPA Poloff September 14 that the GOI wishes to find a "discreet way" to ensure that the Augusta Victoria Hospital in Jerusalem, run by the Lutheran World Federation (LWF), remains in operation despite a 2002 Jerusalem District Court decision revoking the hospital's tax exempt status and imposing several years worth of back taxes. ¶2. (C) Tal said that MFA officials met with LWF President Bishop Mark S. Hanson during the LWF Council's August 31-September 6 annual meeting in Jerusalem, and told Hanson openly that the MFA believes it is in its "best interest" that the hospital "continue and even enlarge its operations." Tal said that, in addition, the MFA instructed the Israeli Ambassador to Geneva to approach the LWF Secretariat there to recommend that the church try to reach an out-of-court settlement because the MFA believes it is likely that the Supreme Court will uphold the District Court decision. Tal said that the GOI now plans to convene an interministerial meeting to see whether a way exists to funnel assistance to the LWF to offset its tax expenses. Tal explained that the LWF is actually entitled to state assistance and can ask for budgetary aid on a permanent basis or for an earmarked project. -------------- Background -------------- ¶3. (C) A 1966 agreement between Jordan and the Lutheran World Federation conferred tax exempt status on Augusta Victoria hospital. This status was then recognized by Israel in 1967 in practice, but never in law. The District Court decided in December 2002 that the 1966 Jordanian agreement is not valid pursuant to a 1978 law requiring all tax exemptions to be based on Israeli law. Since the agreement was never turned into law, Tal explained, the court revoked the hospital's privilege. According to Tal, the District Court also decided that the LWF must pay back-taxes from 2001, amounting to what Tal said is about USD one million. The Supreme Court is scheduled to hear the LWF's appeal on December 1, 2005. ¶4. (C) LWF Jerusalem Director Mark Brown told ConGen Poloff August 31 that the LWF feels that the GOI is acting in bad faith, as he said that the GOI specifically agreed in 1967 to exempt the LWF from taxation, as had been previous practice under Jordanian rule and the British Mandate, but now is using internal legal technicalities to violate its agreement. Brown said that the LWF has no interest in the specific means by which the GOI resolves its internal legal disputes to honor its agreement -- only in the result. He said that the LWF "simply will not be able to provide close to our current level of service if we have to pay the employer tax. If we also have to pay the claimed back taxes, amounting to millions of dollars, it will devastate and possibly end our operations." ********************************************* ******************** Visit Embassy Tel Aviv's Classified Website: http://www.state.sgov.gov/p/nea/telaviv You can also access this site through the State Department's Classified SIPRNET website. ********************************************* ******************** KURTZER